We received overpayments on invoices. We have to receive the full payment amount in order to reconcile which creates an unapplied payment. We would like credit memo

It isn't possible to transfer an overpayment from an unapplied payment to a credit memo in QuickBooks Online (QBO), Angela. This will double the unapplied payment amount that can be applied to the customer's future invoice.

Since the overpayment has already been recorded in your QBO account as an unapplied payment, creating a separate credit memo for it isn’t recommended, as it would duplicate the credit and double the unapplied payment amount. Instead, you can use the unapplied payment directly to offset future invoices or issue a refund if needed.

To apply the credit to an existing invoice, follow these steps:

1. Go to + Create.
2. Select Receive payment.
3. Choose the customer.
4. Select the invoice in the Outstanding Transactions section, then the unapplied payment in the Credits area. Since the credit balance remains from the overpayment, you can apply it toward another open invoice by selecting it. 
5. Click Record and close. 

If you opt to refund the customer for the overpayment, please see Option 2 in this article for the complete guide: Handle customer credit or overpayment in QuickBooks Online.

Also, enhance your QuickBooks experience by partnering with our QuickBooks Live Expert Assisted team. With their expertise, you can simplify processes, boost productivity, and receive personalized guidance tailored to your business’s specific requirements.

Feel free to leave a comment on this thread if you have any additional questions or need further assistance managing customer payments. We’re here to help.